UK Inflation Rises Above 3% for the First Time in Five Years

For the coming few days, traders can expect the Brexit news to lose a little bit of heat because the market is shifting its focus to the wage data in the United Kingdom. The UK wage data would be announced today, and a policy meeting has been scheduled by Bank of England tomorrow.

It is to be noted that US FOMC meeting would end today and the market is speculating the Fed to increase the benchmark rate within the range of 1.25 to 1.50 percent.

The Office for National Statistics yesterday submitted a report for a hike at consumer prices by 3.1% monthly basis in November from earlier 3%. Analysts were hoping the inflation rate to be 3 percent. It is the first time since 2012 that the inflation rate in the UK has crossed 3 percent. If we remove the volatile goods price, the core inflation rate is at 2.7% and meets the estimates of the analysts.

Since the UK inflation rate has crossed 3% mark, the Governor of Bank of England would write a public letter to the Chancellor and discuss the steps that Monetary Policy Committee would bring the inflation rate to 2 percent mark.

The market would be closely watching the wage data because it would give clear hints for the future rate hikes. A majority of economists believe that inflation would drop steadily in 2018 and earnings would rise above the inflation. The real wage growth would allow the Bank of England to increase the interest rates further.

Steven Rudford

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